ACA-mandated health plan requirements for business owners have been implemented in stages since the enactment of the law in 2010, and several important requirements are happening in 2015 for businesses of 50–99 employees and their offered health plans. Here’s what you need to know for your business in order to stay compliant and avoid any penalties.
Meeting the Employer Shared Responsibility Requirement
The employer shared responsibility requirement for employers of 50–99 employees will go into effect on January 1, 2016. As an employer, you must offer minimum essential coverage to at least 95 percent of your full-time employees and their dependents at this time, as laid out by the Kaiser Family Foundation. This coverage must also meet 60 percent of your employees’ covered medical expenses in order to be considered “minimum essential” coverage. Additionally, health plans must meet the affordability percentage and therefore must not exceed 9.56 percent of an employee’s household income; this percentage is established by the IRS and is subject to change.
As your business moves through 2015, your FTE (full-time equivalent) employee number is extremely important. You’ll need to track it in order to determine if (or when) you are (or will be) an applicable large employer that must follow ACA mandates or face penalties. If you are in or will move into the 50–99 range this year, you can be penalized in 2016 if you don’t meet ACA minimum essential coverage requirements. If you’re at the higher end of that range, know that expanding to 100-or-more FTEs will lead to penalties in 2015, as transition relief in 2015 was implemented only for the 50–99-range businesses. Also, know that, for 50–99 businesses, you can use an FTE measurement of any consecutive six-month period during this time (until 2016) to determine if you’re an applicable large employer; you then have the next six months to make needed changes for compliance (again, this holds true until the start of 2016).
When it comes to determining the status of each of your employees, you’re permitted to use the look-back period, which is designed to calculate which of your employees meet the statutory definition of full-time employee (i.e., minimum of 30 hours per week on average per month). This comes into effect particularly for seasonal or part-time workers; by averaging their hours logged per week over a certain prior length of time (3–12 months), you can determine if these employees must be considered as full-time (by exceeding the defined average of 30 hours) and whether they need to be covered by your plan.
January 1, 2015 has triggered certain ACA reporting requirements for business of 50-plus employees. Section 6055 was added by the IRS and requires the filing of an informational return by each business offering minimum essential coverage. The requirement was delayed a year, now enforcing that all business owners offering such coverage provide this information for their 2015 health plans. The purpose of this requirement is to verify that individuals have met the individual shared responsibility requirement by obtaining minimum essential coverage through their employer or another source. You will be required to file Forms 1094-C and 1095-C. Draft copies of Forms 1094-C and 1095-C, and their instructions, are available from the IRS for review.
It’s important to stay up to date with what the law will require of you as an employer this year and next. You can always ask your broker, if you have one, or a representative at your health insurance carrier for help with determining your next steps as it relates to the ACA.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Donald Parker has more than 20 years of experience in the insurance and financial services industry with several Fortune 500 companies. He holds a life, accident and health insurance license in Virginia. He has been FINRA Series 7, 24, 63 and 65 registered and specializes in the areas of long-term care, senior needs, retirement and employee benefit planning.